There are two areas circled A is a Drop Base Rally and B is a Rally Base Rally. Why do we expect unfilled orders here.

Couldnt it just be that supply liquidty limit orders have been removed as opposed to buying pressure which causes the large move away, instead of instutional buy orders. If we trade these zones based on unfilled institutional limit orders that are unfilled, how does the large limit buy orders cause the price to move higher when they are only limit orders as opposed to market orders that would move price? Isnt the move away due to supply being eaten thus limit orders being consumed by Market orders how does the distance it leaves the area have to do with institutional buy limit orders.

I'm not an expert at this but have spent some time getting my head around order flow concepts so I'll have a go:. You can get an idea of whether price is moving up just because of lack of supply or because of actual buying pressure by looking at the strength of the bars.

Imagine a strong 50 pip up bar on a hourly chart. Each uptick during the bar represents a closed transaction. So such a strong bar can only exist by active participation by buyers. However, a 10 pip up bar on an hourly chart might just mean lack of supply and demand with price moving up simply because it is the direction of least resistance.

It is in the dealers interest to do this since their commissions depend on filling the orders. This is the hated 'stop hunting' by retail traders.

Supply Demand zones (understanding the orderflow) - Candlesticks, Chart Patterns, and Price Action - wugadukucevu.web.fc2.com Forex Trading Forum

Contrary to popular belief, the dealers are not being evil and hunting their mini lots, they are actually just trying to fill large institutional orders. Limit orders once triggered are market orders, and will cause a surge if a large number are triggered close together. You wrote 'supply being eaten'. This implies strong buying. In a strong up move bulls are entering the market and overpowering bears. If the bulls are winning the battle they will start triggering the stop losses of bears.

A stop loss on a short is equal to a buy order. So the up move will get a boost if it hits an area where a large number of stops are clustered. Thanks for your detailed response!!!

Couldnt you technically have a long range up bar due to supply being limited eg: Would this be coupled with low volume. If this were to occur a tick chart it would show gapping however on hourly or other timeframe it would look like strength but its really just same amount of buyers with no supply between price levels? I think I understand what you are saying about institutions getting orders filled and they can do this easier where there are pools of liquidity eg stops etc.

However, going back to my crappy drawing, many trade supply demand zones based on the premise there are unfilled institutional orders left and the large move away is caused by institutional limit orders buy in this example. You mention that limit orders become market orders. Unless they are marketable limit orders placed in front of market eg; buying higher than current price 'marketable buy limit , where they are marketable once hit, but only stay as limit orders when it cant be filled at price specified or better.

So I guess im still unsure on how institutional buy limit orders can cause price to move so quick and far in supply demand zone examples if they are 'non marketable' buy limit orders eg: Thanks Piipatron for your response, Im just a bit confused so seeking some clarification on my points above perhaps I am way off in my thinking.

Any thoughts from you or others would be great. Ah this is based on Sam Seiden's stuff. I was just answering based on my understanding of order flow.

That would be very risky as whether a zone will hold or break depends on the market conditions at the time that price revisits the zone. Any zone can be broken easily, given the right conditions, and if you look carefully you will spot several places on your charts where this happened in the past. If institutions consider a price as wholesale they will place buy orders and if they consider it retail they will place sell orders. The buy orders may be market orders, limit orders or stop orders.

Consider a scenario where price is approaching a demand zone wholesale price that institutions are interested in. Some will place limit orders at the zone to make sure they have enough liquidity supply to get in before price moves up. Liquidity is a concern for them because their orders are huge. As price approaches close to this zone, institutional dealers will see these large orders and want to fill them, as that would mean tens of thousands in commissions for them.

So the dealers do whatever they can to ensure the limit orders are hit. Once the entry price of a limit order is hit, it is executed as a market order. Given that the orders are large enough to eat all the supply, this is when price will surge up. Now smaller hedge funds and some retail traders will also have noticed the same zone, but having less liquidity requirements they may be waiting for confirmation before joining the up move as this is less risky.

They may use market orders or buy stop orders slightly after the uptrend begins to join the surge of course some may have used limit orders as well and participated in the initial surge.

Forex Factory - Supply and Demand in a Nutshell by Alfonso Moreno | Demand | Supply And Demand

This adds to the demand along the up move. The traders that were betting on price continuing to fall will have their stops hit during the sudden up move. A stop on a sell order is a buy order. So this adds more fuel to the fire. On the M1 or M5 time frames a sudden spike may be misleading, but on longer time frames a big bar usually means big volume. As you already know, pending orders cannot affect market price until they are executed. Another thing to consider is the time of day, day of week and time of year.

London Open or New York Open will usually have the highest liquidity. Meanwhile the Asian session may produce counter trend moves. Babypips has some good material on this in their school.

Mondays mornings and Friday nights or days preceding major news events will also have lesser volume. Same goes for major holidays. If you want a measurement of volume you can look at tick volume for your broker.

However, this is not very accurate and is specific to your broker. Lastly, if you feel your strategy relies heavily on volume, you can trade forex futures instead of spot forex as reliable volume information is available for futures. Thanks again for your answer, most of it makes good sense to me!!!

Also, they use fresh levels. Finally, isnt it the sell market orders that would be matched up against standard buy limit orders. Meaning its the opposite market order that tries to eat into the institutions buy limit orders.

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Institutions may have tactics to coax these opposing market orders. I know that buy limit orders above current price are Marketable meaning they are market orders when hit but always thought standard limit orders never get executed as market orders.

I'm glad you're applying common sense to understand market dynamics. The rationale of 'unfilled orders' lying around eludes you because it doesn't make sense! Professional traders are first and foremost risk managers. No risk manager worth their salt will leave a pending order lying around at a level just because that level produced a good reaction in the past.

That would be against the disclaimer you see everywhere in forex right? However, once price approaches a good zone, professional traders will be busy analyzing whether that zone is still good to place their orders. If there is confluence of other factors e. Even Seiden does not use his zones alone. I remember he sometimes made use of Bollinger Bands to increase probability of success a completely statistical tool with no basis in order flow.

This acknowledges that he doesn't really know if orders really exist at a 'fresh' zone and has to add in other factors to increase his win percentage. Google Rocky's thread on Forex Factory to see the best application of supply demand that I have seen till now.

On your second question, all pending orders are 'marketable' because if a pending order can never be executed as a market order it is not really an order right? A pending order above current price is a buy stop.

A pending order below current price is a buy limit. Once price reaches the entry price of either type, the order is executed as buy order at market price i. The babypips school explains in more detail. Glad to be of help. You can return the favor someday as you develop as a trader.

Thanks for your answers, much appreciated. I guess I've just been hit to much.

Supply/Demand indicator based on Sam Seiden's Rules - Page 3

I can read then and have the assistance of wonderful software that identifies them. But I no longer stand on these levels like I once did. I use floor pivots, trendlines, Time 10mins around the top or bottom of the hour as well as Fibs for confluence. The picture is of the GOP news back in Dec.

Notice fast price fell and look at all the old grey zones and how price stutters at the lower zones for a couple seconds then continues down. You can tell almost every zone on this picture gets some type of respect before it got broken.

Sorry that we can't see the bounce count on all these zones but I just think that the market makers and all the automated software that can trade this fast has very similar logic when it all comes down to it. All of these computer programs are made by human so we are all going watching the same levels to a certain degree. After watching all of this stuff.

If you are a discretionary trader please make sure you have confirmation of multi-timeframes, pivots, fib, time, etc.

Thats really what I see with the RBR and DBD levels too. I've seen some really awesome levels that I thought for sure would work out and just got slammed.

Traders never seem to be happy when what they can pull out of the market. Supply Demand zones understanding the orderflow Beginner Questions.

Candlesticks, Chart Patterns, and Price Action.

Please see the attached basic drawing very basic There are two areas circled A is a Drop Base Rally and B is a Rally Base Rally. Any help would be appreciated, Cheers Example. Hi Andy, I'm not an expert at this but have spent some time getting my head around order flow concepts so I'll have a go: That is how I rationalize a strong up move at a good demand zone.

Please let me know if Im wrong or if you can point in me in the direction of related material. Thanks again for your detailed reponse!!!!!!!